Mitcham Industries Reports Fiscal 2014 Second Quarter Results

Mitcham Industries Reports Fiscal 2014 Second Quarter Results
PR Newswire
HUNTSVILLE, Texas, Sept. 4, 2013
HUNTSVILLE, Texas, Sept. 4, 2013 /PRNewswire/ -- Mitcham Industries, Inc.
(NASDAQ: MIND) today announced financial results for its fiscal 2014 second
quarter ended July 31, 2013.
Total revenues for the second quarter of fiscal 2014 were $20.9 million
compared to $23.1 million in the second quarter of fiscal 2013. Equipment
leasing revenues were $6.4 million in the second quarter compared to $10.9
million in the same period last year.The Company reported a net loss of
$693,000, or $(0.05) per share, for the second quarter of fiscal 2014 compared
to net income of $6.4 million, or $0.48 per diluted share, in the second
quarter of fiscal 2013, which included an after-tax benefit of $5.3 million
resulting from the settlement of outstanding tax issues. Excluding the impact
of the tax benefit, net income for the second quarter of fiscal 2013 was $1.1
million, or $0.08 per diluted share.
Bill Mitcham, President and CEO, stated, "We had anticipated softness in our
second quarter results due to seasonal patterns in the leasing business,
however, the level of leasing revenues was clearly disappointing. Continued
weakness in U.S. land activity; project delays due to permitting difficulties,
labor unrest and security issues in Colombia; and a recent decline in marine
leasing activity were the major contributors to lower leasing revenues.
Despite these disappointments, there were some bright spots. We generated
higher land leasing revenues in Europe, where business has clearly improved,
as well as in the Pacific Rim and Asia, where our leasing revenues increased
substantially in the second quarter.
"U.S. land leasing activity has remained weak since the beginning of fiscal
2014 as a result of a shift in exploration spending towards drilling activity
and away from seismic programs. In Latin America, we have recently seen many
new projects awarded by the oil companies to seismic contractors in
Colombia. However, there continue to be delays in starting those jobs,
causing some projects scheduled for calendar 2013 to move into next year.
While Latin America remains a challenging area, based on our discussions with
clients and others in the region, we continue to believe the region offers
great opportunities, not only in Colombia but also in Bolivia, Brazil and
Argentina.
"We are seeing increased opportunities in Europe, North Africa and the Middle
East, all of which we can serve from our Budapest facility. Accordingly, we
have recently enhanced our sales force in that area by adding an industry
veteran based in Europe, who will be leading our efforts in that region.
Leasing activity in the Pacific Rim and Asia was strong this quarter as we
deployed additional equipment to those areas. Activity for the Russian winter
season appears to be ramping early this year. We have already contracted some
business for the upcoming winter and may deploy additional equipment into that
region.
"We continue to believe the current softness in marine leasing is temporary.
There has been some recent consolidation and reorganization among marine
contractors, resulting in a large amount of used equipment coming into the
market. While this has had a temporary negative impact on our business, which
is expected to continue in the third quarter, industry consolidation should be
a positive development for the health of the marine leasing business going
forward.
"Seamap, as expected, had another solid quarter, delivering one GunLink 4000
system and two BuoyLink systems, along with sales of other equipment, spare
parts and support services. Additional system deliveries are scheduled for the
third and fourth quarters.
"This is not the first down cycle we have seen in the seismic industry, and we
have considerable experience in managing through these situations. Our
financial position remains very strong. We have no net debt and over $20
million of cash as of July 31, 2013 and have generated over $16 million in
cash flow from operations so far this year. We also have almost $50 million
of additional liquidity available under our revolving credit agreement.
Situations like the current one often create opportunities, and we are well
positioned to take advantage of them as they occur."
FISCAL 2014 SECOND QUARTER RESULTS
Total revenues for the second quarter of fiscal 2014 were $20.9 million
compared to $23.1 million a year ago. A significant portion of our revenues
are typically generated from geographic areas outside the United States, and
during the second quarter of fiscal 2014, the percentage of revenues from
international customers was approximately 89% compared to 68% in the second
quarter of fiscal 2013.
Equipment leasing revenues, excluding equipment sales, were $6.4 million
compared to $10.9 million in the same period a year ago. The reduction in
second quarter equipment leasing revenues was primarily due to a decline in
land leasing activity in the United States, continued softness in Latin
America due to project delays as well as lower activity in marine leasing,
partially offset by increased land leasing revenues in Europe, the Pacific
Rim, Asia and Africa.
Lease pool equipment sales were $2.1 million for the second quarter of fiscal
2014 compared to $3.2 million in the second quarter a year ago. Sales of new
seismic, hydrographic and oceanographic equipment were $5.4 million compared
to $1.7 million in the second quarter a year ago, primarily attributable to
significant deliveries for a variety of hydrographic and oceanographic
projects in the Philippines and China.
Seamap equipment sales for the second quarter of fiscal 2014 were $7.0 million
compared to $7.3 million in the same period a year ago. The fiscal 2014
second quarter included shipments of one GunLink 4000 system and two BuoyLink
systems, as well as other equipment sales and after-market business including
replacement parts, engineering services and ongoing support and repair
services. The second quarter a year ago included the delivery of one GunLink
4000 system.
Lease pool depreciation expense in the second quarter of fiscal 2014 was $7.4
million compared to $8.4 million in the same period a year ago, representing a
12% decline, due to certain equipment becoming fully depreciated and the
decline in lease pool additions in fiscal 2014. Lease pool additions in the
first six months of fiscal 2014 were approximately $4.8 million compared to
$17.8 million in the first six months of fiscal 2013.
Gross profit in the second quarter of fiscal 2014 declined to $4.3 million
from $7.4 million in the second quarter a year ago largely due to lower
leasing revenues. General and administrative expenses were approximately $6.0
million in the second quarter of fiscal 2014 compared to $5.7 million for same
period a year ago.
EBITDA (earnings before interest, taxes, depreciation and amortization) for
the second quarter of fiscal 2014 was $6.7 million, or 32% of revenues,
compared to $10.2 million, or 44% of revenues, in the same period last year.
EBITDA, which is not a measure determined in accordance with United States
generally accepted accounting principles ("GAAP"), is defined and reconciled
to reported net income and cash provided by operating activities, the most
comparable GAAP measures, in the accompanying financial tables.
FISCAL 2014 FIRST SIX MONTHS RESULTS
Total revenues for the first six months of fiscal 2014 were $48.2 million
compared to $57.7 million for the first six months of fiscal 2013. Equipment
leasing revenues, excluding equipment sales, were $26.5 million in the first
six months of fiscal 2014 compared to $31.9 million in the same period a year
ago. Lease pool equipment sales in the first six months of fiscal 2014 were
$3.0 million versus $5.5 million in the first six months of fiscal 2013. Sales
of new seismic, hydrographic and oceanographic equipment for the first half of
fiscal 2014 were $7.7 million compared to $2.5 million in the first half of
fiscal 2013. Seamap equipment sales for the first half of fiscal 2014 were
$10.9 million compared to $17.8 million in the same period of last year.
Gross profit in the first six months of fiscal 2014 was $18.9 million compared
to $24.3 million in the first six months of fiscal 2013. Gross profit margin
in the two periods was 39% and 42%, respectively. Net income for the first
six months was $5.6 million, or $0.43 per diluted share, compared to $14.9
million, or $1.12 per diluted share, for the first half of fiscal 2013, which
included a tax benefit of $5.3 million. Without the tax benefit, net income
for the first half of fiscal 2013 was approximately $9.6 million, or $0.72 per
diluted share. EBITDA for the first six months of fiscal 2014 was $22.4
million, or 46% of total revenues, compared to $30.0 million, or 52% of total
revenues, in the first six months of fiscal 2013.
SHARE REPURCHASE PROGRAM
In April 2013, our Board of Directors authorized a share repurchase program
for up to 1.0 million shares of common stock through December 31, 2014. We
did not purchase any of our common stock in the second quarter of fiscal 2014
due to blackout restrictions and market conditions. During the first half of
fiscal 2014, we repurchased through open market transactions approximately
100,000 shares of common stock at an average cost of approximately $14.79 per
share.
Future purchases may be made from time to time, based on market conditions,
legal requirements and other corporate considerations, in the open market or
otherwise on a discretionary basis. We expect to finance any repurchases from
a combination of cash on hand, cash provided by operating activities and
proceeds from our revolving credit facility.
CONFERENCE CALL
We have scheduled a conference call for Thursday, September 5, 2013 at 9:00
a.m. Eastern Time to discuss our fiscal 2014 second quarter results. To access
the call, please dial (480) 629-9835 and ask for the Mitcham Industries call
at least 10minutes prior to the start time. Investors may also listen to the
conference live on the Mitcham Industries corporate website,
http://www.mitchamindustries.com, by logging onto the site and clicking
"Investors." A telephonic replay of the conference call will be available
through September 19, 2013 and may be accessed by calling (303) 590-3030 and
using passcode 4635692#. A web cast archive will also be available at
http://www.mitchamindustries.com shortly after the call and will be accessible
for approximately 90days. For more information, please contact Donna
Washburn at Dennard ▪ Lascar Associates (713)529‑6600 or email
dwashburn@dennardlascar.com.
Mitcham Industries, Inc., a geophysical equipment supplier, offers for lease
or sale, new and "experienced" seismic equipment to the oil and gas industry,
seismic contractors, environmental agencies, government agencies and
universities. Headquartered in Texas, with sales and services offices in
Calgary, Canada; Brisbane, Australia; Singapore; Ufa, Bashkortostan, Russia;
Budapest, Hungary; Lima, Peru; Bogota, Colombia and the United Kingdom,
Mitcham conducts operations on a global scale and is the largest independent
exploration equipment lessor in the industry. Through its Seamap business,
Mitcham designs, manufactures and sells specialized seismic marine equipment.
Certain statements and information in this press release concerning results
for the quarter ended July 31, 2013 may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The words "believe," "expect," "anticipate," "plan," "intend,"
"should," "would," "could" or other similar expressions are intended to
identify forward-looking statements, which are generally not historical in
nature. These forward-looking statements are based on our current
expectations and beliefs concerning future developments and their potential
effect on us. While management believes that these forward-looking statements
are reasonable as and when made, there can be no assurance that future
developments affecting us will be those that we anticipate. All comments
concerning our expectations for future revenues and operating results are
based on our forecasts of our existing operations and do not include the
potential impact of any future acquisitions. Our forward-looking statements
involve significant risks and uncertainties (some of which are beyond our
control) and assumptions that could cause actual results to differ materially
from our historical experience and our present expectations or projections.
For additional information regarding known material factors that could cause
our actual results to differ from our projected results, please see our
filings with the SEC, including our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K.
Readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date hereof. We undertake no
obligation to publically update or revise any forward-looking statements after
the date they are made, whether as a result of new information, future events
or otherwise.
Contacts: Billy F. Mitcham, Jr., President & CEO
Mitcham Industries, Inc.
936-291-2277
Jack Lascar / Karen Roan
Dennard ▪ Lascar Associates
713-529-6600
MITCHAM INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
July 31, 2013 January 31, 2013
ASSETS
Current assets:
Cash and cash equivalents $ 20,298 $ 15,150
Restricted cash 719 801
Accounts receivable, net 23,651 23,131
Current portion of contracts and notes 1,075 2,096
receivable
Inventories, net 6,536 6,188
Deferred tax asset 7,023 5,591
Prepaid income taxes 1,751 1,842
Prepaid expenses and other current assets 4,039 3,079
Total current assets 65,092 57,878
Seismic equipment lease pool and property and 105,874 119,608
equipment, net
Intangible assets, net 3,587 3,989
Goodwill 4,320 4,320
Deferred tax asset 4,816 4,296
Other assets 32 316
Total assets $ 183,721 $ 190,407
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,436 $ 6,921
Current maturities – long-term debt 130 145
Deferred revenue 653 539
Accrued expenses and other current liabilities 2,930 1,875
Total current liabilities 8,149 9,480
Non-current income taxes payable 376 376
Long-term debt, net of current maturities 139 4,238
Total liabilities 8,664 14,094
Shareholders' equity:
Preferred stock, $1.00 par value; 1,000 - -
shares authorized; none issued and outstanding
Common stock, $0.01 par value; 20,000 shares
authorized; 13,867 and 13,763 shares issued 139 138
at July 31, 2013 and January 31, 2013,
respectively
Additional paid-in capital 117,368 116,506
Treasury stock, at cost (1,030 and 926 shares
at July 31, 2013 and January 31, 2013, (6,402) (4,860)
respectively)
Retained earnings 61,962 56,348
Accumulated other comprehensive income 1,990 8,181
Total shareholders' equity 175,057 176,313
Total liabilities and shareholders' $183,721 $ 190,407
equity
MITCHAM INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
For the Three Months Ended For the Six Months
July 31,
Ended July 31,
2013 2012 2013 2012
Revenues:
Equipment leasing $ 6,442 $ 10,882 $ 26,535 $ 31,890
Lease pool equipment sales 2,119 3,204 3,019 5,536
Seamap equipment sales 6,958 7,262 10,885 17,806
Other equipment sales 5,376 1,732 7,747 2,479
Total revenues 20,895 23,080 48,186 57,711
Cost of sales:
Direct costs - equipment 1,119 1,940 2,392 4,645
leasing
Direct costs - lease pool 7,386 8,437 14,805 16,831
depreciation
Cost of lease pool equipment 559 1,007 961 2,411
sales
Cost of Seamap and other 7,531 4,296 11,131 9,538
equipment sales
Total cost of sales 16,595 15,680 29,289 33,425
Gross profit 4,300 7,400 18,897 24,286
Operating expenses:
General and administrative 6,048 5,719 12,087 11,038
Recovery of doubtful accounts - - - (428)
Depreciation and amortization 378 340 753 669
Total operating expenses 6,426 6,059 12,840 11,279
Operating (loss) income (2,126) 1,341 6,057 13,007
Other income (expenses):
Interest, net 160 (96) 157 (101)
Other, net 1,000 29 739 (569)
Total other income 1,160 (67) 896 (670)
(expenses)
(Loss) income before income (966) 1,274 6,953 12,337
taxes
Benefit (provision) for income 273 5,128 (1,339) 2,521
taxes
Net (loss) income $ (693) $ 6,402 $ 5,614 $ 14,858
Net (loss) income per common
share:
Basic $ (0.05) $ 0.51 $ 0.44 $ 1.17
Diluted $ (0.05) $ 0.48 $ 0.43 $ 1.12
Shares used in computing net
income per common share:
Basic 12,742 12,665 12,766 12,646
Diluted 12,742 13,262 13,198 13,294
MITCHAM INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Six Months
Ended July 31,
2013 2012
Cash flows from operating activities:
Net income $ 5,614 $ 14,858
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,624 17,567
Stock-based compensation 553 1,064
Provision for doubtful accounts, net of - (17)
charge offs
Provision for inventory obsolescence 58 118
Gross profit from sale of lease pool (2,058) (3,125)
equipment
Excess tax benefit from exercise of
non-qualified stock options and restricted (44) (350)
shares
Deferred tax benefit (695) (1,815)
Changes in non-current income taxes payable - (5,003)
Changes in working capital items:
Accounts receivable (2,568) 11,722
Contracts and notes receivable 1,329 (850)
Inventories (1,028) (370)
Prepaid expenses and other current assets (1,382) 1,109
Income taxes receivable and payable (1,666) (7,105)
Prepaid foreign income tax - 3,519
Accounts payable, accrued expenses, other 2,224 (2,042)
current liabilities and deferred revenue
Net cash provided by operating 15,961 29,280
activities
Cash flows from investing activities:
Purchases of seismic equipment held for lease (7,829) (27,316)
Purchases of property and equipment (405) (485)
Sale of used lease pool equipment 3,019 5,536
Net cash used in investing activities (5,215) (22,265)
Cash flows from financing activities:
Net payments on line of credit (4,000) (150)
Payments on borrowings (72) (1,494)
Net purchases of short-term investments 7 -
Proceeds from issuance of common stock upon 252 96
exercise of options
Purchase of treasury stock (1,527) -
Excess tax benefit from exercise of
non-qualified stock options and restricted 44 350
shares
Net cash used in financing activities (5,296) (1,198)
Effect of changes in foreign exchange rates on (302) 441
cash and cash equivalents
Net change in cash and cash equivalents 5,148 6,258
Cash and cash equivalents, beginning of period 15,150 15,287
Cash and cash equivalents, end of period $ 20,298 $ 21,545
MITCHAM INDUSTRIES, INC.
Reconciliation of Net Income and Net Cash Provided by Operating Activities to
EBITDA
For the Three Months Ended For the Six Months Ended
July 31, July 31,
2013 2012 2013 2012
(in thousands) (in thousands)
Reconciliation of Net
income to EBITDA and
Adjusted EBITDA
Net (loss) income $ (693) $ 6,402 $ 5,614 $ 14,858
Interest (income) (160) 96 (157) 101
expense, net
Depreciation and 7,798 8,810 15,624 17,567
amortization
(Benefit) provision for (273) (5,128) 1,339 (2,521)
income taxes
EBITDA ^(1) 6,672 10,180 22,420 30,005
Stock-based compensation 287 870 553 1,064
Adjusted EBITDA ^(1) $ 6,959 $ 11,050 $ 22,973 $ 31,069
Reconciliation of Net
cash provided by
operating activities to
EBITDA
Net cash provided by $ 7,571 $ 11,416 $ 15,961 $ 29,280
operating activities
Stock-based compensation (287) (870) (553) (1,064)
Changes in trade
accounts, contracts and (3,738) (7,147) 1,239 (10,872)
notes receivable
Interest paid 16 158 82 325
Taxes paid , net of 2,246 3,214 3,625 7,035
refunds
Gross profit from sale of 1,560 2,197 2,058 3,125
lease pool equipment
Changes in inventory (317) 535 1,028 370
Changes in accounts
payable, accrued expenses
and other current (50) 1,210 (2,224) 2,042
liabilities and deferred
revenue
Changes in prepaid
expenses and other (196) - 1,382 -
current assets
Other (133) (533) (178) (236)
EBITDA ^(1) $ 6,672 $ 10,180 $ 22,420 $ 30,005
EBITDA is defined as net income before (a) interest expense, net of
interest income, (b) provision for (or benefit from) income taxes and
(c) depreciation, amortization and impairment. Adjusted EBITDA excludes
stock-based compensation. We consider EBITDA and Adjusted EBITDA to be
important indicators for the performance of our business, but not measures
of performance calculated in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). We have
included these non-GAAP financial measures because management utilizes
this information for assessing our performance and liquidity and as
indicators of our ability to make capital expenditures, service debt and
finance working capital requirements. The covenants of our revolving
credit agreement contains financial covenants that are based upon Adjusted
EBITDA. Management believes that EBITDA and Adjusted EBITDA are
measurements that are commonly used by analysts and some investors in
evaluating the performance and liquidity of companies such as us. In
particular, we believe that it is useful to our analysts and investors to
(1) understand this relationship because it excludes transactions not related
to our core cash operating activities. We believe that excluding these
transactions allows investors to meaningfully trend and analyze the
performance and liquidity of our core cash operations. EBITDA and Adjusted
EBITDA are not measures of financial performance or liquidity under GAAP
and should not be considered in isolation or as alternatives to cash flow
from operating activities or as alternatives to net income as indicators
of operating performance or any other measures of performance derived in
accordance with GAAP. In evaluating our performance as measured by EBITDA,
management recognizes and considers the limitations of this measurement.
EBITDA and Adjusted EBITDA do not reflect our obligations for the payment
of income taxes, interest expense or other obligations such as capital
expenditures. Accordingly, EBITDA and Adjusted EBITDA are only two of the
measurements that management utilizes. Other companies in our industry
may calculate EBITDA or Adjusted EBITDA differently than we do and EBITDA
and Adjusted EBITDA may not be comparable with similarly titled measures
reported by other companies.
MITCHAM INDUSTRIES, INC.
Segment Operating Results
(unaudited)
For the Three Months Ended For the Six Months Ended
July 31, July 31,
2013 2012 2013 2012
(in thousands) (in thousands)
Revenues:
Equipment Leasing $ 13,937 $ 15,818 $ 37,301 $ 39,905
Seamap 7,042 7,454 10,976 18,295
Inter-segment sales (84) (192) (91) (489)
Total revenues 20,895 23,080 48,186 57,711
Cost of sales:
Equipment Leasing 13,119 12,788 24,162 26,016
Seamap 3,602 3,121 5,311 8,013
Inter-segment costs (126) (229) (184) (604)
Total cost of sales 16,595 15,680 29,289 33,425
Gross profit 4,300 7,400 18,897 24,286
Operating expenses:
General and 6,048 5,719 12,087 11,038
administrative
Recovery of doubtful - - - (428)
accounts
Depreciation and 378 340 753 669
amortization
Total operating 6,426 6,059 12,840 11,279
expenses
Operating (loss) income $ (2,126) $ 1,341 $ 6,057 $ 13,007
Equipment Leasing
Segment:
Revenue:
Equipment leasing $ 6,442 $ 10,882 $ 26,535 $ 31,890
Lease pool equipment 2,119 3,204 3,019 5,536
sales
New seismic equipment 158 170 275 438
sales
SAP equipment sales 5,218 1,562 7,472 2,041
13,937 15,818 37,301 39,905
Cost of sales:
Direct costs-equipment 1,119 2,012 2,392 4,882
leasing
Lease pool depreciation 7,438 8,528 14,908 16,962
Cost of lease pool 559 1,007 961 2,411
equipment sales
Cost of new seismic 121 107 200 247
equipment sales
Cost of SAP equipment 3,882 1,134 5,701 1,514
sales
13,119 12,788 24,162 26,016
Gross profit $ 818 $ 3,030 $ 13,139 $ 13,889
Gross profit % 6% 19% 35% 35%
Seamap Segment:
Equipment sales $ 7,042 $ 7,454 $ 10,976 $ 18,295
Cost of equipment sales 3,602 3,121 5,311 8,013
Gross profit $ 3,440 $ 4,333 $ 5,665 $ 10,282
Gross profit % 49% 58% 52% 56%
SOURCE Mitcham Industries, Inc.
Website: http://www.mitchamindustries.com